Some 90% of UK spending on foreign aid contracts goes to British companies – ranking behind only Australia and the United States, which awarded 93% and 95% of contracts to their own firms respectively.
The European Network on Debt and Development (Eurodad), which wrote the report, said the practice makes aid spending more expensive and less effective.
Studies estimate that when aid is “tied” – meaning it is required to be spent in the donor country – its cost increases by between 15% and 30%, equal to billions of pounds globally.
Around half of overseas development contracts in 2016 were awarded to firms in the donor country, Eurodad said.
Polly Meeks, senior policy and advocacy officer at Eurodad, told Sky News: “When you’re talking about food aid that has a major impact on the people who are getting fed.”
If aid is to make a bigger impact, spending on the goods and services for aid projects could go to businesses in the countries that need help, Ms Meeks said.
This would help firms and create jobs, boosting the economy grow in a more sustainable way, she added.
Rich countries are still awarding more than half of their bilateral aid contract spending to companies from their own countries. Read more at https://t.co/U9nOxB0PTA #DevelopmentUntied #tiedaid #ODA pic.twitter.com/UpbeK7VKDR
— Eurodad (@eurodad) September 24, 2018
“You expect that donors are looking to develop local economies in the global south. Spending should reflect that,” Ms Meeks said.
The Department for International Development (DfID), which declined to comment on Eurodad’s report, stopped formally tying aid in 2002 and has said all foreign aid contracts are open and transparent.
The department says it seeks the best value for money in its aid procurement, and that firms in the global south may be smaller and less equipped to handle big orders.
Jesse Griffiths, a specialist at the Overseas Development Institute, told Sky News there may be good reasons for the concentration of aid to UK firms, but that the reality could be more complicated.
“Just because you’re not tying aid officially doesn’t mean you’re not tying aid informally,” he said.
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He added that the high proportion of UK contracts for foreign aid could be down to difficult bureaucracy and opportunities being shared in English, or at trade fairs in the UK, and not overseas.
Mr Griffiths also suggests there could be a political motivation.
“There’s sometimes a desire on the part of the government to make sure they support firms from their own countries,” he told Sky News.
He believes development is in the “national interest”, because helping other countries means helping the UK too.
But sometimes it can get mixed up with short-term, political strategies, he added.
“This short-term, unprincipled interpretation of the national interest unfortunately the direction some donor countries are taking,” Mr Griffiths said.